Local Shops vs. Online Retailers: Competition or Synergy?

Abstract

Retailers in remote rural areas face competition from online retailers that can offer superior product availability and variety. This paper explores the issues stores in Scottish small island communities face due to the residents’ increased opportunities for ‘virtual mobility’, and highlights strategies for their economically sustainable operation. Eight semi-structured interviews were conducted with shop owners on seven islands in the council areas of Orkney, Argyll and Bute, and Highland. The research has found that while online retailers are frequently used by the islanders, the small shops on the islands are vital for the communities, particularly for elderly residents. Their close connection with the community enables shop owners to flexibly respond to demand, but elevated transport cost and lack of economies of scale lead to high prices. Shops stay competitive by offering additional services to the community, for example, they frequently incorporate the post office. Local produce is available in many shops, but is not distributed beyond the island community, as none of the retailers sell via the Internet. There is very little evidence of cooperation with other businesses, despite an acknowledged opportunity to create valuable economies of scale to cut transport cost. Any attempt to tackle this issue will have to focus primarily on the creation of trust amongst local businesses.